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The State of the City (the Greater NYC Metro Region) in Angel and Venture Financing

It turns out that all of the boasting about the Greater NYC metro region rapidly becoming that heretofore elusive “Silicon Alley” is an emerging reality. Our area scored a record year in 2015 for venture capital and angel investments, up nearly 40% from the prior year. While 2016 likely will present some unique challenges, an examination of the current landscape of NYC metro leads to a single, inescapable conclusion: NYC and its surrounding areas are an ever-increasing destination of choice for entrepreneurs and innovators, and the investors who support them.

Alley Watch, which provides critical information to the technology, entrepreneurial and investor communities, conducted a survey of deals completed both nationally and in Greater NYC in February 2016. When compared to and complemented by the results for the prior year and for the greater region as a whole, the findings are instructive.

Local seed financings constituted over 15% of the deals completed nationally, a trend that has been continuing and now appears to be sustainable. Average seed deal size was about 20% higher than the national average, and NYC metro captured over 20% of the aggregate proceeds invested nationally.

The scenario changes a bit as later-stage financing levels are examined, and no single trend has yet to emerge. For example, local Series A deals were roughly 10% of the national level, and deal size was only about two-thirds that of the national average, with our area capturing 6% of the aggregate proceeds invested nationally. With respect to later-stage growth-oriented transactions, such as Series B transactions, NYC metro companies constituted roughly 25% of deals completed nationally (a far larger percentage than Series A transactions). As with Series A deals, these Series B deals were smaller than the national average (again, only about two-thirds) and amounted to 14% of the aggregate proceeds invested nationally. Interestingly, at the later-stage venture capital financing level, NYC metro deals constituted almost 15% of the deals completed nationally, with larger deal size (30% larger than the national average) and about 17% of the aggregate invested proceeds.

There are some who assert that the statistics relating to NYC metro Series A deals expose a negative conclusion – suggesting that the region’s companies emerging from the seed stage are less attractive to investors than are emerging companies elsewhere, such as Silicon Valley and the Route 128 corridor in Boston. We reach a different conclusion. The totality of the evidence, statistical and anecdotal, suggests instead that the abundance of seed-stage companies in NYC metro reveals a market that is still relatively immature but which is developing rapidly. As the market matures, we predict that the region’s percentage of later-stage deals, as well as the size of the deals and the amount of proceeds invested overall, will continue to grow. The market is a developing one, and the continuing high number of start-ups could well be skewing the results.